Argentine nervous savers withdrew 522 million dollars in the last week

Argentines still view the dollar as a store of wealth and a transaction medium

The outflow of foreign-currency deposits from Argentina's banking system showed no sign of slowing last week, as nervous savers withdrew 522 million dollars from bank accounts.

Foreign-currency deposits fell to 10.52 billion on June 15, the central bank said in a report Friday. Those deposits are overwhelmingly US dollars, which Argentines view as a safe haven amid times of economic uncertainty.

The loss of dollar deposits still isn't a serious threat to banks, as they represent less than 10% of their total deposit base.

However, the dwindling stock of dollar deposits likely will make export financing more expensive. The outflows also have dented the central bank's international reserves.

As of June 15, more than 5.5 billion in foreign-currency deposits had left the banking system since President Cristina Fernandez imposed exchange controls on Oct. 31, 2011, to limit capital flight that was draining reserves.

Severe restrictions on dollar purchases by businesses and individuals scared Argentines who remember the forced conversion of their dollar savings into pesos during a deep economic crisis in 2002.

Argentines still view the dollar as a store of wealth and a transaction medium because of their country's long history of high inflation and runaway government spending that frequently ended in currency devaluations.

The dollar continues to be legal tender in Argentina and is used overwhelmingly in most real-estate transactions. Nearly all used-home sales in major cities are paid for in dollars.

The deposit outflows are also a sign that savers expect annual inflation that has been running at about 25% for several years to eventually force the government to weaken the peso at a faster rate than it has been willing to do until now.

The peso weakened to close at ARS4.5110 to the dollar on the regulated MAE foreign-exchange wholesale market Friday, bringing its year-to-date loss to 8.9%. But when adjusted for inflation, the peso has actually gained ground versus the greenback.